MADRID – In May, Spain saw a 24% year-on-year decline in new residential mortgages, the sharpest decline since January 2021.
The average interest rate at the start was 3.15%, the highest level since April 2017, according to the Instituto Nacional de Estadística (INE) data. Despite the decline in May, which was stronger than in previous months, there has been a decline in new mortgages for four months in a row. This decline is impacted by rising interest rates in an effort to curb inflation, which has led to higher borrowing costs.
In May, 33,398 new residential mortgages were registered. Despite the decline from a year earlier, there was a month-on-month increase of 23.5% compared to April. However, a 12% drop has been observed since the beginning of the year.
Higher interest rates since 2017
The average interest rate for new residential mortgages increased by more than a point to 3.15% compared to the previous year. This is the highest level in six years. The average term of the mortgages was 25 years, with an average starting interest rate of 2.79% for variable-rate mortgages and 3.4% for fixed-rate mortgages.
In May, 62% of new mortgages were at fixed rates and the remaining 38% at floating rates. The capital borrowed in May exceeded €4.735 billion, 27.5% less than in the same month of 2022. Furthermore, the average mortgage amount for a home was €141,798, 4.6% lower.
Mortgage market stabilising
Statements from several real estate platforms indicate that the mortgage market is stabilising after an exceptionally good 2022. They believe that interest rates will not rise much further and that consumers will become less afraid of prolonged high-interest rates. In addition, it is noted that, despite current trends, mortgage levels are still similar to pre-pandemic levels, pointing to a correction in the industry after the record year of 2022.